Clearwire a Broadband Ponzi Scheme Says Suit

New York, NYMillions of Americans have signed up with Clearwire, an Internet subscriber service based in Washington state that promises lightning fast performance, but attorney Peter Seidman from the firm of Milberg LLP in New York says many of those subscribers are severely disappointed with what they get.

"You can test the speed of your Internet access, and many of the people that we have spoken to have done just that," says Seidman. "They've reported to us that in many cases their service is as slow as dial-up service used to be."

Milberg LLP has launched a national class action against Clearwire, alleging the company is "akin to a ponzi scheme" because it offers "high speed" or "faster" Internet service knowing that it cannot deliver on what it promises.

"Clearwire leads everyone to believe that you are going to get blazing fast, reliable Internet and they don't do this at all," says Seidman. "So the suit is simple. What they promise isn't there."

Clearwire's promotional material also promises "unlimited usage" and that your connection "will never be slowed down." However, Milberg's investigation of Clearwire has found that the company has signed more subscribers than their infrastructure can handle and, consequently, doesn't have the capacity to do what it says it can.

"When the user achieved a certain level of usage, which is not disclosed, they deliberately slow that user's service in an attempt to even it out for all subscribers," says Seidman.

According to the documents filed, Clearwire "deliberately throttles down" access during peak Internet usage times, making it impossible for users to download music or stream video.

"They are desperately trying to increase their revenues," says Seidman. "They are having significant financial difficulties and they are trying to attract as many subscribers as possible right now. And they do that by making these promises that they can't make good on."

Clearwire has some 70 million subscribers nationwide and Seidman says the suit is based on complaints from many, many of the Internet service provider's unsatisfied customers from across the US.

Adding "insult to injury," the suit alleges that customers who try to exit the service are harangued by extra fees. "When subscribers realize they are not getting high-speed Internet access, Clearwire tries to collect either a termination fee or subscription fee."

The suit charges that Clearwire is in violation of a series of consumer protection laws and is guilty of deceptive trade practices as well as breach of contract. Plaintiffs are asking for themselves and others, equitable relief and treble damages.

In other words, they want their money back and they want the company to pay for breaking the law.


Peter Seidman is a partner with Milberg LLP in New York City. His work focuses on the investigation and prosecution of securities litigation on behalf of defrauded investors. Seidman is a former journalist and Peace Corps volunteer.